Market watchdog the Financial Markets Authority (FMA) says it tried to minimise investor losses by giving a Pyne Gould Corporation subsidiary time to repay a $28 million related-party loan.
But now time’s up, and investors need to know about its concerns with the loan from the cash fund of PGC’s wealth management unit Perpetual Trust and the investment vehicle (Torchlight) of PGC chairman and majority shareholder George Kerr.
The FMA has just made a statement to the NZX following the High Court discharge of confidentiality orders that were keeping details of its investigation into Perpetual Trust secret.
FMA’s statement says the loans were not in the best interests of investors in the funds and the circumstances in which they were made by Perpetual reflects a lack of judgment and lack of understanding of its role as trustee of funds of this nature.
The FMA sought to minimise losses that investors may suffer by engaging with Perpetual to seek the return of the loans.
And since April 2012, around half of the total amount lent to Torchlight has been repaid, but approximately $13 million remains outstanding.
“FMA considers Perpetual has now had ample time to secure repayment of the loans, but is concerned at the lack of progress and the consequent risk to investors," the statement says.
“FMA believes investors in the fund need to be aware of its concerns about the loans made by the fund to Torchlight and the delays in repayment, so they can make informed decisions about their investments."
FMA chief executive Sean Hughes says the authority’s actions are in line with its objective to promote the confident and informed participation of businesses, investors and consumers in the financial markets.
PGC shares – mostly held by George Kerr – are trading at 29c - valuing the company at about $60.7 million.
Perpetual Trust’s response
Pyne Gould Corporation has responded with an update to the NZX on behalf of its wealth management unit Perpetual Trust.
The statement says Perpetual Trust does not accept the FMA”s interpretation of a $28 million interfund facility between the Perpetual Cash Management Fund (CMF) and Torchlight Fund No. 1.
“Perpetual considers that the interfund facility provides superior first-ranking security and provides a good return,” the statement says.
“However, to alleviate the concerns raised by the FMA, Perpetual has (without prejudice to its position) asked Torchlight to prepay the $28 million interfund facility in advance of the scheduled repayment in February 2013.”
Torchlight has agreed to do so, it says.
“To date, Torchlight has prepaid $15 million in cash leaving a balance of approximately $13 million outstanding. Full prepayment is expected this month.”